Saturday, August 16, 2008

Drawn by their pledge to beat the money market rates of the top 5% of competitive institutions and of course the 4.76% APY introductory rate, I opened an account with Everbank. I searched and read everything I could find about the bank until I felt comfortable sending the initial deposit. It's one thing to mail a check to Fidelity Funds or Vanguard, institutions that have been around forever, and quite another to send a check to a fairly new, unfamiliar entity, like Everbank.

Lots of questions come to mind; like why are they able to pay such high money market rates? Their website clearly states that they don’t engage in the subprime mortgage market, but what about other speculative markets? Where are they physically located? Are the deposits FDIC insured, etc. Obviously, the current financial crisis has made me more cautious and that is usually a good thing.

I completed the application on line, printed it out, signed and mailed it in with a check. The 4.76% APY rate is for the first three months and then the rate reduces to 3.51% APY, which is still a very competitive rate and beats my Vanguard prime money market rate. APY stands for annual percentage yield and includes the effects of intra-year compounding. Not to be confused with APR, which is the annual percentage return, and is the straight rate over one year with no compounding. Unless you plan to skim the interest rate payment out of your account each month, you will automatically have this payment added to your investment and enjoy the higher APY rate.

The Everbank pledge money market account looks to be a good parking spot for some of my emergency cash funds. I always keep a couple of years expenses in a steady, easily accessible cash account. Check writing privileges at Everbank (allowing 3 per month) should give me quick access to the cash. I would prefer to ladder some of this money in CDs, but money market rates are beating CD rates, right now, so I have not been buying any new Certificate of Deposits. Fortunately, Everbank has a very informative web page that lists all of their rates for their products - that should make it easier for me to keep an eye on any rate changes that may come along.

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